Project on mutual funds as an investment avenue

A
SUMMER PROJECT REPORT
ON
MUTUAL FUND AS AN INVESTMENT AVENUE AT

PRESENTED TO

ARNI SCHOOL OF BUSINESS MANAGEMENT
KATHGARG, INDORA (HP)
2009-11

PRESENTED BY
RANJEET SINGH SAINI
ID:-AEMB0060A/09

Projectsformba.blogspot.com

(A) MUTUAL FUND
1. INTRODUCTION
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in
different types of securities depending upon the objective of the scheme. These could
range from shares to debentures to money market instruments. The income earned
through these investments and the capital appreciations realized by the scheme are
shared by its unit holders in proportion to the number of units owned by them (pro rata).
Thus a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed portfolio at a relatively
low cost. Anybody with an inventible surplus of as little as a few thousand rupees can
invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective
and strategy

A Mutual fund is the ideal investment vehicle for today’s complex and
modern financial scenario. Markets for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have become mature and
information driven. Price changes in these assets are driven by global events occurring
in faraway places. A typical individual is unlikely to have the knowledge, skills,
inclination and time to keep track of events, understand their implications and act
speedily. An individual also finds it difficult to keep track of ownership of his assets,
investments, brokerage dues and bank transactions etc.

A draft offer document is to be prepared at the time of launching the fund.
Typically, it pre specifies the investment objectives of the fund, the risk associated, the
costs involved in the process and the broad rules for entry into and exit from the fund


and other areas of operation. In India, as in most countries, these sponsors need approval
from a regulator, SEBI (Securities exchange Board of India) in our case. SEBI looks at
track records of the sponsor and its financial strength in granting approval to the fund
for commencing operations.

A sponsor then hires an asset management company to invest the funds
according to the investment objective. It also hires another entity to be the custodian of
the assets of the fund and perhaps a third one to handle registry work for the unit holders
(subscribers) of the fund.

In the Indian context, the sponsors promote the Asset Management Company also,
in which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the
Asset Management Company (AMC). E.g. Birla Global Finance is the sponsor of the
Birla Sun Life Asset Management Company Ltd., which has floated different mutual
funds schemes and also acts as an asset manager for the funds collected under the
schemes.

Characteristics:
• A mutual fund actually belongs to the investors who have pooled their funds.
• A mutual fund is managed by investment professionals and other service providers,
who earn a fee for their services, from the fund.
• The pool of funds is invested in a portfolio of marketable investments. The value of
the portfolio is updated every day.
• The investor’s share in the fund is denominated by ‘units’. The value of the units
changes with change in the portfolio’s value, every day. The value of one unit of
investment is called the Net Asset Value or NAV.


2. HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank the. The history of
mutual funds in India can be broadly divided into four distinct phases.

First Phase: 1964-1987
An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of
the RBI. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of
India (IDBI) took over the regulatory and administrative control in place of RBI. The first
scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700
crores of AUM.

Second Phase: 1987-1993 (Entry of Public Sector Funds)
In 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of
India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June
1987.

Third Phase: 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the
year in which the first Mutual Fund Regulations came into being, under which all mutual
funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now

merged with Franklin Templeton) was the first private sector mutual fund registered in
July 1993. The industry now functions under the SEBI (Mutual Fund) Regulations
1996.As at the end of January 2003; there were 33 mutual funds with total assets of Rs.
1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under
management was way ahead of other mutual funds.

Fourth Phase – Since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of
India with assets under management of Rs.29, 835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return and certain other
schemes.The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC.
It is registered with SEBI and functions under the Mutual Fund Regulations.


The graph indicates the growth of assets over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit
Trust of India effective from February 2003. The Assets under management of the Specified


Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the
industry as a whole from February 2003 onwards.

3. MUTUAL FUND STRUCTURE

The Structure Consists

The structure of mutual funds in India is governed by the SEBI Regulations, 1996. These
regulations make it mandatory for mutual funds to have a 3-tier structure of Sponsors-
Trustee-AMC (Asset Management Company). The Sponsor is the promoter of mutual
fund, and appoints the Trustee. The Trustees are responsible to the investors in the mutual
funds, and appoint the AMC for managing the investment portfolio. The AMC is the


business face of the mutual funds, as it manages all the affairs of mutual funds. The
mutual funds and AMC have to be registered by the SEBI.

Sponsor
Sponsor is the person who acting alone or in combination with another body corporate
establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the
Investment Managed and meet the eligibility criteria prescribed under the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not
responsible or liable for any loss or shortfall resulting from the operation of the Schemes
beyond the initial contribution made by it towards setting up of the Mutual Fund

Trust
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian
Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration
Act, 1908.

Trustee
Trustee is usually a company (corporate body) or a Board of Trustees (body of
individuals). The main responsibility of the Trustee is to safeguard the interest of the unit
holders and inter-alia ensure that the AMC functions in the interest of investors and in
accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations,
1996, the provisions of the Trust Deed and the Offer Documents of the respective
Schemes. At least 2/3rd directors of the Trustee are independent directors who are not
associated with the Sponsor in any manner.

Asset Management Company (AMC)


The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. The
AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to
act as an asset management company of the Mutual Fund. At least 50% of the directors of
the AMC are independent directors who are not associated with the Sponsor in any
manner. The AMC must have a net worth of at least 10 crores at all times.

Registrar and Transfer Agent
The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to
the Mutual Fund. The Registrar processes the application form, redemption requests and
dispatches account statements to the unit holders.

Custodian
A custodian handles the investment back office of a mutual fund. Its responsibilities
include receipt and delivery of securities, collection of income, distribution of dividends,
and segregation of assets between schemes. The sponsor of a mutual fund cannot act as a
custodian to the fund. For example, Deutsche Bank is a custodian, but it cannot service
Deutsche Mutual Fund, its mutual fund arm.

Depository
Indian capital markets are moving away from having physical certificates for securities, to
ownership of these securities in ‘dematerialized’ form with a Depository.


4.MUTUAL FUND OPERATION

Mutual Fund Operation Flow Chart
Fund managers

investors

Invest in

Pass to
Investor

stock &securities

Generate return


5.TYPES OF MUTUAL FUND
Diagram

A Mutual Fund may float several schemes, which may be classified on the basis of its
structure, its investment objectives and other objectives.

Open – Ended Schemes


As the name implies the size of the scheme (fund) is open – i.e. not specified or pre-
determined. Entry to the fund is always open, the investor who can subscribe at anytime.
Such fund stands ready to buy or sell its securities at anytime. The key feature of Open-
ended schemes is Liquidity. It implies that the capitalization of the fund is constantly
changing as investors sell or buy their shares. Further, the shares or units are normally not
traded on the stock exchange but are repurchased by the funds at announced rates. Open-
ended schemes have comparatively better liquidity despite the fact that these are not
listed. The reason is that investors can any time approach mutual fund for sale of such
units. No intermediaries are required. Moreover, the realizable amount is certain since
repurchase is at a price based on declared net asset value (NAV). The portfolio mix of
such schemes has to be investments, which are actively traded in the market. Otherwise it
will not be possible to calculate NAV. This is the reason that generally open-ended
schemes are equity based. In Open-ended schemes, the option of dividend reinvestment is
available.

Close-Ended Schemes
A Close – ended schemes have a definite period after which their shares/units are
redeemed. The scheme is open for subscription only during a specified period at the time
of launch of a scheme. Investors can invest in the scheme at the time of the initial public
issue and thereafter they can buy or sell the units of the scheme on the stock exchanges
where the units are listed. In order to provide an exit route to the investors, some close-
ended funds give an option of selling back the units to the mutual fund through periodic
repurchase at NAV related prices. In these types of schemes, the size of the fund kept to
be constant. SEBI regulations stipulate that at least one of the two exit routes is provided
to the investor i.e. either repurchase facility or through listing on stock exchanges. These
mutual funds schemes disclose NAV generally on weekly basis.


Interval schemes
Interval Schemes combine the features of both open-ended and close-ended schemes.
They are open for sale or redemption during pre-determined intervals at NAV based
prices.

Mutual Fund schemes by Investment Objectives:

EQUITY FUNDS
These funds invest a major part of their corpus in equities. The composition of the fund
may vary from scheme to scheme and the fund manager’s outlook on various scrip’s.
The Equity Funds are sub-classified depending upon their investment objective, as
follows:

1. Growth Fund: Aim to provide capital appreciations over the medium to long term.

These schemes normally invest a majority of their funds in equities and are willing to
bear short term decline in value for possible future appreciation. These schemes are
not for investors seeking regular income or needing their money back in the short-
term

2. Diversified Equity Fund: Diversified equity funds are the most popular among

investors. They invest in many stocks across many sectors, and because they have
the freedom to chop and churn their portfolios as they like, diversified equity funds


are a good proxy to the stock market. If a general exposure to equities is what you
want, they are a good option. They can invest in all listed stocks, and even in unlisted
stocks. They can invest in which ever sector they like, in what ever ratio they like.
3. Equity – Linked Savings Schemes (ELSS): Equity – linked savings schemes

(ELSS) are diversified equity funds that additionally offer income tax benefits to
individuals. ELSS is one of the many section 80c instruments, along with the more
popular debt options like the PPF, NSC and infrastructure bonds. In this Section 80c
grouping. ELSS is unique. Being the only instrument to offer a total equity exposure.

4. Index Fund: An index fund is a diversified equity fund; with a difference- a fund

manager has absolutely no say in stock selection. At all times, the portfolio of an
index fund mirrors an index, both in its choice of stocks and their percentage
holding. As of March 2004, equity index funds tracked either the Sensex or the
Nifty. So, an index fund that mirrors the Sensex will invest only in the 30 Sensex
stocks, which too in the same proportion as their weight age in the index.

5. Sector Fund: Sector funds invest in stocks from only one sector, or a handful of

sectors. The objective is to capitalize on the story in the sectors, and offer investors a
window to profit from such opportunities. It’s a very narrow focus, because of which
sector funds are considered the riskiest among all equity funds.

6. Mid – Cap Fund: These are diversified funds that target companies on the fast –

growth trajectory. In the long run, share prices are driven by growth in a company’s
turnover and profits. Market players refer to them as ‘mid-sized companies’ and
‘mid-cap stocks’ with size in this context being benchmarked to a company’s market


value. So, while a typical large cap stock would have a market capitalization of over
Rs 1,000 crores, a mid-cap stock would have a market value of Rs 250-2,000 crores.

DEBT FUNDS
These Funds invest a major portion of their corpus in debt papers. Government authorities,
private companies, banks and financial institutions are some of the major issuers of debt
papers. By investing in debt instruments, these funds ensure low risk and provide stable
income to the investors.
Debt funds are further classified as:

1. Gilt Funds: Invest their corpus in securities issued by Government, popularly

known as GOI debt papers. These Funds carry zero Default risk but are associated
with Interest Rate risk. These schemes are safer as they invest in papers backed by
Government.

2. Income Funds: Income funds aim to maximize debt returns for the medium to

longer term. Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.

3. MIPs: Invests around 80% of their total corpus in debt instruments while the rest of

the portion is invested in equities. It gets benefit of both equity and debt market.
These scheme ranks slightly high on the risk-return matrix when compared with
other debt schemes.

4. Short Term Plans (STPs): Meant for investors with an investment horizon of 3-6

months. These funds primarily invest in short term papers like Certificate of

Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also
invested in corporate debentures.

5. Liquid Funds: Also known as Money Market Schemes, These funds are meant to

provide easy liquidity and preservation of capital. These schemes invest in short-
term instruments like Treasury Bills, inter-bank call money market etc. These funds
are meant for short-term cash management of corporate houses and are meant for an
investment horizon of 1day to 3 months. These schemes rank low on risk-return
matrix and are considered to be the safest amongst all categories of mutual funds.

6. Floating Rate Funds: These income funds are more insulated from interest rate

than their conventional peers. In other words, interest rate changes, which cause the
NAV of a conventional debt fund to go up or down, have little, or no, impact on
NAVs of floating rate funds.

BALANCED FUNDS

These funds, as the name suggests, are a mix of both equity and debt funds. They invest in
both equities and fixed income securities, which are in line with pre-defined investment
objective of the scheme. These schemes aim to provide investors with the best of both the
worlds. Equity part provides growth and the debt part provides stability in returns.
Each category of funds is backed by an investment philosophy, which is pre-defined in the
objectives of the fund. The investor can align his own investment needs with the funds
objective and invest accordingly.

HYBRID FUNDS:-

1. Growth and Income Fund: Strike a balance capital appreciation and income for

the investors. In these funds portfolio is a mix between companies with good
dividend paying record and those with potential capital appreciation. These funds
are less risky than growth funds bit more than income funds.

2. Asset Allocation Fund: These funds follow variable asset allocation policy. These

move in an out of an asset class (equity, debt, money market or even non-financial
assets). Asset allocation funds are those, which follow more stable allocation
policies like balanced funds. Those, which flexible allocation policies, are like
aggressive speculative funds.

6. COMPARISON OF MUTUAL FUND


Invest
Mutual Investment Who Should ment
Risk
Fund Objective Portfolio Invest Horiz
on
3
Equity Long-term Capital Aggressive investors
High Risk Stocks & Shares years +
Funds Appreciation Long term Inv.

Capital Balanced ratio of
Balanced Growth & Regular Market Risk equity and debt funds Moderate & 2
Funds Income and Interest to ensure higher Aggressive years +
Risk returns at lower risk
To generate returns
that are NAV varies
Portfolio indices like 3
Index Funds commensurate with with index Aggressive investors.
BSE, NIFTY etc years +
returns of performance
respective indices
12
Interest Rate Government Salaried & conservative
Gilt Funds Security & Income months
Risk securities investors
+
Credit Risk & Debentures, 12
Salaried & conservative
Bond Funds Regular Income Interest Rate Govt securities, months
investors
Risk Corporate Bonds +
Treasury Bills,
Liquidity +
Certificate of Park funds in current 2 days
Money Moderate Income +
Negligible Deposits, A/cs or short-term - 3
Market Reservation of
Commercial Papers, Bank Dep. weeks
Capital
Call Money
Short-term
Call Money,
Funds 3 weeks
CommPapers,
(Floating - Liquidity + Little Interest Those with surplus -
Treasury Bills, CDs,
short-term) Moderate Income Rate short-term funds 3
Short-term Govt.
months
securities.


7.ADVANTAGES OF MUTUAL FUND
Diagram 6

Affordability Diversification

Variety
Regulations

Professional
Tax Benefits
Mgmt

Mutual Funds offer several benefits to an investor that are unmatched by the other
investment options. Last six years have been the most turbulent as well as exiting ones for
the industry. New players have come in, while others have decided to close shop by either
selling off or merging with others. Product innovation is now passé with the game shifting
to performance delivery in fund management as well as service. Those directly associated
with the fund management industry like distributors, registrars and transfer agents, and
even the regulators have become more mature and responsible.

1. Affordability : Small investors with low investment fund are unable to invest in
high-grade or blue chip stocks. An investor through Mutual Funds can be
benefited from a portfolio including of high priced stock.
2. Diversification : Investors investment is spread across different securities
(stocks, bonds, money market, real estate, fixed deposits etc.) and different
sectors (auto, textile, IT etc.). This kind of a diversification add to the stability of


returns, reduces the risk for example during one period of time equities might
under perform but bonds and money market instruments might do well do well
and may protect principal investment as well as help to meet return objectives.
3. Variety : Mutual funds offer a tremendous variety of schemes. This variety is
beneficial in two ways: first, it offers different types of schemes to investors
4. Professional Management: Mutual Funds employ the services of experienced
and skilled professionals and dedicated investment research team. The whole
team analyses the performance and balance sheet of companies and selects them
to achieve the objectives of the scheme.
5. Tax Benefits: Depending on the scheme of mutual funds, tax shelter is also
available. As per the Union Budget-99, income earned through dividends from
mutual funds is 100% tax free. Under ELSS of open-ended equity-oriented funds
an exemption is provided up to Rs. 100,000/- under section 80C.
6. Regulation: All Mutual Funds are registered with SEBI and they function within
the provisions of strict regulations designed to protect the interests of investors.
The operations of Mutual Funds are regularly monitored by SEBI.

8. DISADVANTAGES OF MUTUAL FUND:

The following are the disadvantages of investing through mutual fund:
• No control over cost: Since investors do not directly monitor the fund’s operations,
they cannot control the costs effectively. Regulators therefore usually limit the
expenses of mutual funds.
• No tailor-made portfolio: Mutual fund portfolios are created and marketed by
AMCs, into which investors invest. They cannot made tailor made portfolio.


• Managing a portfolio of funds: As the number of funds increase, in order to tailor
a portfolio for himself, an investor may be holding portfolio funds, with the costs of
monitoring them and using hem, being incurred by him.
• Delay in Redemption: The redemption of the funds though has liquidity in 24-
hours to 3 days takes formal application as well as needs time for redemption. This
becomes cumbersome for the investors.
• Non-availability of loans: Mutual funds are not accepted as security against loan.
The investor cannot deposit the mutual funds against taking any kind of bank loans
though they may be his assets.

9. RISK INVOLVED IN MUTUAL FUND :

THE RISK-RETURN TRADE-OFF
The most important relationship to understand is the risk-return trade-off. Higher the risk
greater the returns/loss and lower the risk lesser the returns/loss.


Hence it is up to you, the investor to decide how much risk you are willing to take. In
order to do this you must first be aware of the different types of risks involved with your
investment decision.

MARKET RISK:
Sometimes prices and yields of all securities rise and fall. Broad outside influences
affecting the market in general lead to this. This is true, may it be big corporations or
smaller mid-sized companies. This is known as Market Risk. A Systematic Investment
Plan (“SIP”) that works on the concept of Rupee Cost Averaging (“RCA”) might help
mitigate this risk.

CREDIT RISK:
The debt servicing ability (may it be interest payments or repayment of principal) of a
company through its cash flows determines the Credit Risk faced by you. This credit risk
is measured by independent rating agencies like CRISIL who rate companies and their
paper. An ‘AAA’ rating is considered the safest whereas a ‘D’ rating is considered poor
credit quality. A well-diversified portfolio might help mitigate this risk.

INFLATION RISK:
Things you hear people talk about: “Rs. 100 today is worth more than Rs. 100 tomorrow.”
“Remember the time when a bus ride costed 50 paisa?”
“Mehangai Ka Jamana Hai.”
The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of
times people make conservative investment decisions to protect their capital but end up
with a sum of money that can buy less than what the principal could at the time of the


investment. This happens when inflation grows faster than the return on your investment.
A well-diversified portfolio with some investment in equities might help mitigate this risk.

INTEREST RATE RISK:
In a free market economy interest rates are difficult if not impossible to predict. Changes
in interest rates affect the prices of bonds as well as equities. If interest rates raise the
prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising
interest rate environment. A well-diversified portfolio might help mitigate this risk.

POLITICAL/GOVERNMENT POLICY RISK:
Changes in government policy and political decision can change the investment
environment. They can create a favorable environment for investment or vice versa.

LIQUIDITY RISK:
Liquidity risk arises when it becomes difficult to sell the securities that one has purchased.
Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well
as internal risk controls that lean towards purchase of liquid securities.

10.NET ASSET VALUE

Net Asset Value (NAV)


The net asset value of the fund is the cumulative market value of the assets fund net of its
liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the
assets in the fund, this is the amount that the shareholders would collectively own. This
gives rise to the concept of net asset value per unit, which is the value, represented by the
ownership of one unit in the fund. It is calculated simply by dividing the net asset value
of the fund by the number of units. However, most people refer loosely to the NAV per
unit as NAV, ignoring the "per unit". We also abide by the same convention.

Definition of NAV

Net Asset Value, or NAV, is the sum total of the market value of all the shares held in
the portfolio including cash, less the liabilities, divided by the total number of units
outstanding. Thus, NAV of a mutual fund unit is nothing but the 'book value.'

Calculation of NAV

The most important part of the calculation is the valuation of the assets owned by the
fund. Once it is calculated, the NAV is simply the net value of assets divided by the
number of units outstanding. The detailed methodology for the calculation of the asset
value is given below.

Asset value is equal to

Sum of market value of shares/debentures

+ Liquid assets/cash held, if any

+ Dividends/interest accrued

Amount due on unpaid assets


Expenses accrued but not paid

Other liabilities
NAV per unit = ------------------------------------------------------------------
No. of units outstanding of the scheme

Details on the above items

For liquid shares/debentures, valuation is done on the basis of the last or closing market
price on the principal exchange where the security is traded

For illiquid and unlisted and/or thinly traded shares/debentures, the value has to be
estimated. For shares, this could be the book value per share or an estimated market price
if suitable benchmarks are available. For debentures and bonds, value is estimated on the
basis of yields of comparable liquid securities after adjusting for illiquidity. The value of
fixed interest bearing securities moves in a direction opposite to interest rate changes
Valuation of debentures and bonds is a big problem since most of them are unlisted and
thinly traded. This gives considerable leeway to the AMCs on valuation and some of the
AMCs are believed to take advantage of this and adopt flexible valuation policies
depending on the situation.

Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, with
every passing day, interest is said to be accrued, at the daily interest rate, which is
calculated by dividing the periodic interest payment with the number of days in each
Period. Thus, accrued interest on a particular day is equal to the daily interest rate
multiplied by the number of days since the last interest payment date.


Usually, dividends are proposed at the time of the Annual General meeting and become
due on the record date. There is a gap between the dates on which it becomes due and the
actual payment date. In the intermediate period, it is deemed to be "accrued".

Expenses including management fees, custody charges etc. are calculated on a daily basis.

NAV and its impact on the returns

We feel that a MF with lower NAV will give better returns. This again is due to the wrong
perception about NAV. An example will make it clear that returns are independent of the
NAV.

Say, you have Rs 10,000 to invest. You have two options, wherein the funds are same as
far as the portfolio is concerned. But say one Fund X has an NAV of Rs 10 and another
Fund Y has NAV of Rs 50. You will get 1000 units of Fund X or 200 units of Fund Y.

After one year, both funds would have grown equally as their portfolio is same, say by
25%. Then NAV after one year would be Rs 12.50 for Fund X and Rs 62.50 for Fund Y.
The value of your investment would be 1000*12.50 = Rs 12,500 for Fund X and 200*62.5
= Rs 12,500 for Fund Y. Thus your returns would be same irrespective of the NAV.

It is quality of fund, which would make a difference to your returns. In fact for equity
shares also broadly this logic would apply.

Misconception about NAV

This situation arises from the perception that a fund at Rs 10 is cheaper than say Rs 15 or
Rs 100. However, this perception is totally wrong and investors would be much better off
once they appreciate this fact.


Two funds with same portfolio are same, no matter what their NAV is. NAV is immaterial.

Why people carry this perception is because they assume that the NAV of a MF is similar
to the market price of an equity share. This, however, is not true.

11. BASIC CONCEPTS OF LOADS :

1. Entry Load: The load charged at the time of investment is known as entry load. It’s

meant to cover the cost that the AMC spends in the process of acquiring subscriber’s
commission payable to brokers, advertisements, register expenses etc. The load is
recovered by way of charging a sale price higher than the prevailing NAV.
2. Exist Load: Some AMC do not charge an entry load but they charged an exist load

i.e., they deduct a load before paying out the redemption proceeds. Psychologically,
investors are much more willing to pay exist loads as compared to entry loads.
3. Unit: Units mean the investment of the unit holders in a scheme. Each unit

represents one undivided share in the assets of a scheme. The value of each unit
changes, depending on the performance of the fund.

12.FACTORS AFFECTING MUTUAL FUND

1. Governmental Influences
Mutual fund business is a highly regulated business throughout the world as it seeks to
ensure that quality and fairly priced schemes are available. Governmental intervention thus
in mutual fund market usually is most needed to ensure that insurers are reliable. And in
the developing countries the additional goal may be promotion of domestic mutual fund
industry and ensuring the national mutual fund industry contributes to overall economic


development. In a non technical sense mutual fund is purchased in a good faith so the duty
of government intervention in mutual fund industry is to ensure that this principle of
mutual fund is never defeated.

The ideology of government plays an important role in mutual fund industry also. For
example in the past during 1991, the P .V Narsimha Rao government strongly believed in
liberalization also liberalized the mutual fund sector which helped to allow private players
in the industry from 1993 and enhancing joint ventures with foreign companies.

The present government with more focuses on foreign direct investments has declared to
favor the rise FDI in mutual fund to 49% which further enhances competition in the
industry.

2. Taxation Policy
Social equity being one of the motives behind tax collections, government give certain
exemptions from such levying. One such exemption is deduction incurred by taxpayers
towards investment in mutual fund coverage. Similarly, capital invested in infrastructure
bonds etc is offered with certain concession under tax laws. The central idea behind such
exemptions is that the capitals so allocated by individuals reduce the ultimate burden on
the public infrastructure or helps in creating such infrastructural facilities.
The income tax rules related to the mutual fund transactions can be classified under:
[A] Exemptions available to companies or businesses
[B] Exemptions available to insured individuals
[A] Exemptions available to companies
• Expenses deductible from commission earned by distributor, banker, national
distributor.


• Tax concessions under risk management practices of an enterprise
• In growth option equity schemes there no long term capital gain by company.
• In dividend option equity schemes there no tax.
• Return received by charitable trust is total exempted from tax.
• Else schemes give to advantage of tax saving, growth potential and return.

[B] Tax rules governing investment by individuals
Deduction in respect of ELSS schemes (sec 80C):
Investment in this fund would enable you to avail the benefits under clause (xiii) of a
section 80C of the Income Tax Act investment made in the schemes up to 1 lakh by the
eligible investor for deduction under this section of the Act.
Since it will be an income deduction an investment of Rs 1 lakh in this fund can save off
Rs. 33600 from your tax payable liability (assuming you are in the highest tax bracket)
Investor will receive tax free dividend in above case.
Investor will also receive tax free dividend by investing equity schemes in dividend option
Investors also receive tax free return by investing equity schemes in growth option for long
term capital gain.

C Tax plannings
An individual can think of health ELSS schemes purchase as a tool of tax planning
exercise. For example people who are marginally affected by tax liability can be as well
purchase a ELSS fund get benefits of Rs. 33600 from tax. In this way tax burden is
become less by purchasing ELSS fund.
Thus tax law offer benefit to individuals/companies by way of exemptions/deductions of
expenditure incurred towards purchase of mutual fund various schemes coverage from
total taxable income.

3. Foreign Trade Regulations
With the vast potential for mutual fund in India due its large population in the country
many foreign companies are ready to enter into the Indian market. But companies can be
permitted in India through joint ventures with an Indian partner as well as come separately
and the foreign equity shall be restricted to only 25%. Another statement also tells that
Indian subsidiaries of foreign companies shall not be allowed to participate in banking
sector unless they entered in to joint ventures with the Indian partners.

But at present the mutual fund regulator is in favor of hike in FDI cap from 25% to 49%,
and is finalizing a report that will be submitted to the government for a comprehensive
legislation for the industry. The security exchange board of India and association of mutual
fund India have been advocating a hike in FDI limit for mutual fund companies so that the
foreign partners can infuse additional funds in these companies to sustain their growth.
The government will need to amend the separate mutual fund Act for FDI capital as well
as domestic company as this is the statutory provision unlike sectors like civil aviation and
telecom, which have come through notification.

4. National Income
The relative importance of the mutual fund Market within a country will also be dependent
upon economic development. With greater rates of economic growth, consumption of
investment should increase as a result of increased income, and an increased stock of
assets requiring mutual fund. Furthermore, the development of mutual fund is likely to
facilitate greater economic growth, implying that economic growth may be endogenous.
Consistent with these arguments, studies find that the level of financial development and


economic development are positively related to the level of mutual fund across emerging
markets.

5. Consumptions and Savings
The gross capital formation of any country is important for indication of its growth in the
future years. It is quite necessary to set up the rate of capital formation so that a large stock
of machines, tools and equipments are accumulated in a country. Experience of
development in other countries suggests that a high rate of capital formation was achieved
to trigger rapid rate of economic growth. With the hike in foreign capital coming to India
the rate of capital formation is becoming boom to insurers, which has given them
opportunities. It is heartening to them to note that latest savings rate of 28% is highest till
now and with the growth rate near to 8% is bringing a pool of buyer’s purchasing power.
This directly influences the demand for mutual fund products.

6. Employment
The effect of employment on mutual fund industry is as direct as that on economic
development of any country. With the rising levels of employment the effect on mutual
fund industry is positive because employment adds to the insured properties and assets
from every prospective be it due to organized or unorganized.

7. Inflation
The midterm policy review the strong macroeconomic indicators and RBI has revised its
GDP growth estimates to the upper limit of the earlier projection range 8% inflation (WPI)


has been steadily moving up in recent times and RBI has highlighted that primary articles
prices have been on of the key contributors. However one needs to keep in mind that
recent increase in global oil prices.

8. Money supply
The central banks has indicated that credit growth and money supply number are likely to
be above its prosecution for the current fiscal year, the statement “to consider promptly all
possible measures as appropriate to the evolving global and domestics situation “is
indicative of phased increase in FII limits for gilt investment could help in depending the
securities market and is part of the road map towards fuller convertibility.

9. Interest
Interest is major factor for investment when a person find less return from investment tool
than people move towards the higher returns tool of investment.

10. Risk factor
All investments in Mutual Fund and securities are subject to market risks and the NAV of
the fund may go up or down depending on the factors and forces affecting the security
market. There can be no assurance that the fund’s objective will be achieved. Past
performance of the sponsors/Mutual fund/schemes/AMC is not necessarily indicative of
the future results. The name of the schemes does not in any manner indicate their quality,
their future prospects or returns.
The specific risk would be credit, market, illiquidity, judgmental error, interest rate, swaps
and forward rates.


11. Demographic environment
The demographic environment significantly affects the demand for the mutual fund
industry. Factors like the average age of the population, levels of education, household
structures income distribution, life style and the extent of industrialization as well as
urbanization terribly influences the demand of mutual fund schemes
In India the average age of the population is at an increasing trend following the improved
medical technology and better awareness of health care requirements. As a result, the risk
of investment death is decreasing while connectivity is increasing. Simultaneously the
demand for pension funds and income fund is expected to grow. For
example at the time of independence the average age of dying for Indians was 45.
Presently it has increased to 65 following better healthcare, improvements in medical
science and more health consciousness among the common man. By 2010 it is expected to
rise to 75. Hence risk profile is also changing. Earlier people are thanking about safely but
at present people thinking about capital growth.

12. Social Factors
The social environment covers the customs, habits, level of education, tastes and standard
of living of people in the society. Today’s social environment is greatly influenced to a
major extent by the changes in technological aspects. With the rapid progress in
technology and economic liberalization, the physical boundaries are gradually vanishing.
As a result, the social life of the people and their views towards risk and uncertainty of life
and health are gradually changing.


These factors of social life are affecting human motivations and emotions related to the
physical and mental incapacities, loss of health and death. In general there are extremes
apprehensions of one’s death, though it is certain. The perception of an individual toward
risk and capital growth depends on the social culture and religious belief. In the urbanized
area people does think about investment and capital growth. These beliefs ultimately
influence the buying behavior of a consumer.

13. Education
Education is major factor of demand for mutual fund product. if the education levels is
higher than the people know the benefits of mutual fund the use mutual fund as investment
tool and also take rise capital growth.

MUTUAL FUND PLAYERS

The Indian mutual fund industry is mainly divided into three kinds of categories.
These categories include public sector players, nationalized banks and private
sector and foreign players.
UTI Mutual Fund was one of the leading Mutual Fund companies in India till May 2006
with a corpus of more than Rs.31, 000 Crore and it is the public sector mutual fund.
Bank of Baroda, Punjab National Bank, Can Bank and SBI are the major nationalized
banks mutual fund.
At present mutual fund industry is mainly dominated by private and foreign sector players
which include major players like Prudential ICICI Mutual Fund, HDFC Mutual Fund,
Reliance Mutual Fund etc. are private sector mutual funds players while Franklin
Templeton etc. are major foreign mutual fund players. At present there are more than 33
players operating in Indian. The brief introduction of major players is given as follows.


ABN AMRO Mutual Fund
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India)
Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India)
Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN
AMRO Mutual Fund.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life
Financial. Sun Life Financial is a global organization evolved in 1871 and is being
represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from
India. Birla Sun Life Mutual Fund follows a conservative long-term approach to
investment. Recently it crossed AUM of Rs. 10,000 Crore.

Bank of Baroda Mutual Fund

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under
the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the

AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank
AG is the custodian.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing
Development Finance Corporation Limited and Standard Life Investments Limited.

HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital
Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund
acts as the Trustee Company of HSBC Mutual Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee
Company. It is a joint venture of Vysya and ING. The AMC, ING Investment
Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential PLC of America; one of the
largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup
on 13th of October 1993 with two sponsors, Prudential PLC. and ICICI Ltd. The Trustee
Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset
Management Company Limited incorporated on 22nd of June 1993.

Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation
Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on
August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the
AMC stands at Rs 25.8 crore.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch
offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today
it is the largest Bank sponsored Mutual Fund in India. They have already launched 35
Schemes out of which 15 have already yielded handsome returns to investors. State Bank
of India Mutual Fund has more than Rs. 5,500 Crore as AUM. Now it has an investor base
of over 8 Lakhs spread over 18 schemes.


Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsor for Tata
Mutual Fund is Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment
manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited.
Tata Asset Management Limited's is one of the fastest in the country with more than Rs.
7,703 Crore (as on April 30, 2005) of AUM.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is
presently having more than 1,99,818 investors in its various schemes. KMAMC started its
operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to
investors with varying risk - return profiles. It was the first company to launch dedicated
gilt scheme investing only in government securities.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The
sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is
the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund, which
was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of
various schemes under which units are issued to the Public with a view to contribute to the
capital market and to provide investors the opportunities to make investments in
diversified securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard
Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard


Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with
SEBI on December 20,1999.

Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a California (USA) based company with a
global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial
services groups in the world. Investors can buy or sell the Mutual Fund through their
financial advisor or through mail or through their website. They have Open end
Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes,
Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Income
schemes and Open end Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and it’s leading in the market
in securities, investment management and credit services. Morgan Stanley Investment
Management (MISM) was established in the year 1975. It provides customized asset
management services and products to governments, corporations, pension funds and non-
profit organizations. Its services are also extended to high net worth individuals and retail
investors. In India it is known as Morgan Stanley Investment Management Private Limited
(MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first
close end diversified equity scheme serving the needs of Indian retail investors focusing on
a long-term capital appreciation.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as its
sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was
incorporated on December 1, 1995 with the name Escorts Asset Management Limited.

Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt.
Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company.
Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark Asset
Management Company Pvt. Ltd. is the AMC.

Can bank Mutual Fund

Can bank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the
sponsor. Can bank Investment Management Services Ltd. incorporated on March 2, 1993
is the AMC. The Corporate Office of the AMC is in Mumbai.

Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance
Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the
Trustee Company and AMC is Cholamandalam AMC Limited.

LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It
contributed Rs. 2 Crore towards the corpus of the Fund. LIC Mutual Fund was constituted
as a Trust in accordance with the provisions of the Indian Trust Act, 1882. . The Company
started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed
Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for
LIC Mutual Fund.

GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a
Government of India undertaking and the four Public Sector General Insurance
Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd.


(NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII)
and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act,
1882.


(B) COMPANY INFORMATION
1. HISTORY

NJ IndiaInvest Pvt. Ltd. is one of the leading advisors and distributors of financial
products and services in India. Established in year 1994, NJ has over a decade of rich
exposure in financial investments space and portfolio advisory services. From a humble
beginning, NJ over the years has evolved out to be a professionally managed, quality
conscious and customer focused financial / investment advisory & distribution firm.

NJ prides in being a professionally managed, quality focused and customer centric
organization. The strength of NJ lies in the strong domain knowledge in investment
consultancy and the delivery of sustainable value to clients with support from cutting-edge
technology platform, developed in-house by NJ.

At NJ we believe in …

• having single window, multiple solutions that are integrated for simplicity and
sapience
• making innovations, accessions, value-additions, a constant process
• providing customers with solutions for tomorrow which will keep them above the
curve, today

NJ has over INR 30 billion* of mutual fund assets under advice with a wide
presence in over 135 locations* in 21states* in India. The numbers are reflections of the
trust, commitment and value that NJ shares with its clients.

NJ Wealth Advisors, a division of NJ, focuses on providing financial planning and
portfolio advisory services to premium clients of high net-worth. At NJ Wealth Advisors,
we have developed processes that focus on providing the best in terms of the advice and
the ongoing management of your portfolio and financial plans.

At NJ, our experience, knowledge and understanding enables us to provide you with
the expected value, in an enhanced way. As a leading player in the industry, we continue
to successfully meet the expectations of our clients, through meaningful and
comprehensive solutions offered by NJ Wealth Advisors


2.VISION & MISSION OF NJ India invest

• Vision

To be the leader in our field of business through,

• Total Customer Satisfaction
• Commitment to Excellence
• Determination to Succeed with strict adherence to compliance
• Successful Wealth Creation of our Customers

• Mission

Ensure creation of the desired value for our customers, employees and associates,
through constant improvement, innovation and commitment to service & quality. To
provide solutions which meet expectations and maintain high professional & ethical
standards along with the adherence to the service commitments

3.PHILOSOPHY

At NJ our Service and Investing philosophy inspire and shape the thoughts, beliefs,
attitude, actions and decisions of our employees. If NJ would resemble a body, our
philosophy would be our spirit which drives our body.

Service Philosophy:
Our primary measure of success is customer satisfaction …

We are committed to provide our customers with continuous, long-term
improvements and value-additions to meet the needs in an exceptional way. In our efforts
to consistently deliver the best service possible to our customers, all employees of NJ will
make every effort to:

• think of the customer first, take responsibility, and make prompt service to the
customer a priority
• deliver upon the commitments & promises made on time
• anticipate, visualize, understand, meet, exceed our customer’s needs


• bring energy, passion & excellence in everything we do
• be honest and ethical, in action & attitude, and keep the customer’s interest supreme
• strengthen customer relationships by providing service in a thoughtful & proactive
manner and meet the expectations, effectively
•

Investing Philosophy:
We aim to provide Need-based solutions for long-term wealth creation

We aim to provide all customers of NJ, directly or indirectly, with true, unbiased,
need-based solutions and advice that best meets their stated & un-stated needs. In our
efforts to provide quality financial & investment advice, we believe that

• Clients want need-based solutions, which fits them
• Long-term wealth creation is simple and straight
• Asset-Allocation is the ideal & the best way for long-term wealth creation
• Educating and disclosing all the important facets which the customer needs to be
aware of, is important
• The solutions must be unbiased, feasible, practical, executable, measurable and
flexible
• Constant monitoring and proper after-sales service is critical to complete the on-
going process

At NJ our aim is to earn the trust and respect of the employees, customers,
partners, regulators, industry members and the community at large by following our
service and investing philosophy with commitment and without exceptions.

4.MANAGEMENT

The management at NJ brings together a team of people with wide experience and
knowledge in the financial services domain. The management provides direction and
guidance to the whole organisation. The management has strong visions for NJ as a
globally respected company providing comprehensive services in financial sector.

The ‘Customer First’ philosophy in deeply ingrained in the management at NJ. The aim
of the management is to bring the best to the customers in terms of

• Range of products and services offered
• Quality Customer Service


All the key members of the organisation put in great focus on the processes & systems
under the diverse functions of business. The management also focuses on utilizing
technology as the key enabler for all the activities and to leverage the technology for
enhancing overall customer experience.

The key members of the management are:

Mr. Neeraj Choksi Jt. Managing Director
Mr. Jignesh Desai Jt. Managing Director

Sales Team:
Mr. Misbah Baxamusa National Head
Mr. Naveen Rathod V.P.

Executive Team:
Mr. Shirish Patel Information Technology
Mr. Vinayak Rajput Finance & Operations
Mr. Abhishek Dubey Marketing & Development
Mr. Viral Shah Research
Mr. Dhaval Desai Human Resources

5.SERVICE STANDARDS

Service in words, service in action

Service is the key to unlocking customer satisfaction, which again is key for sustainability
of any business. At NJ we understand this very well. NJ has set strict processes in place to
deliver quality services to customers. At NJ strict quality service standards are set and a
well-defined process is established and followed religiously by our quality customer
service teams. Performance is evaluated on a frequent basis and glitches are ironed out.

But quality service also involves quality people in addition to processes. NJ gives
significant focus to the proper training and development of the people involved in the
service delivery chain.

Further we,


• Have well-defined "Privacy Policy" to keep clients’ information confidential &
internal audits done on the same at regular intervals
• Receive various statistics which are analyzed on an ongoing basis to improve the
service standards

We are committed to improve and enhance our services and undertake new service
initiatives. Such and other services differentiate us with other service providers in the
industry.

Our Service Commitments …

The service commitments are to guide the actions of the people at NJ. Clearly stated,
customers can freely communicate any such actions/events wherein they feel that any of
the following commitments have been breached / compromised. At NJ we desire to honour
our commitments at all points of time and to all our customers without any bias.

• To provide customer-focussed need-based valued services
• To provide reliable, accurate and timely information
• To maintain all records in privacy
• To optimize services/benefits at least justifiable cost
• To develop and grow the customers’ business
• To provide constructive after sales service
• To honour our service commitments

6.PRODUCTS

Life Vista

Life is counted not in years, but in moments. Moments of truth, joy, achievement and
satisfaction. Of peace, tranquility, and freedom. At NJ, we bring such moments to life.

Connecting Goals

Life Vista is for individuals who are looking for goal oriented planning. The client would
typically have a family, with multiple goals directed at meeting the obligations/goals in
life. Meeting obligations like education and marriage of children, meeting basic needs like
purchase of property, or business assets, would ideally be on agenda for such clients.
Retirement planning would also be an important goal in life along with securing the future
for those dependent.


Process of Connecting Goals

With Life Vista we take the onus to help you achieve your goals in life. Our team
would undertake a detailed financial planning exercise for you. An ideal personalised,
financial plan would then be recommended after detailed study. The team would then
constantly monitor the progress of your plan. Any changes in the environment that may
happen during the interim period would be incorporated into your plan. At Life Vista our
objective is to connect you with your goals and your dreams with reality.

How we can help you

We will do a detailed study of your goals and objectives in life and would help you by
devising a comprehensive plan to help you achieve them. We would also regularly monitor
your plans to make sure that you are always on track to achieve your goals.

Asset Vista

Wealth is not an end. Neither is it a beginning. Wealth is a process, a journey.
A journey of power, achievement and responsibility .
At NJ we ensure that this journey continues and grows.

Creating Wealth

Asset Vista is ideal for individuals or corporates looking for portfolio management
services. Typically, the client would have sizeable investments made into multiple assets
and/or products. The need for Asset Vista may arise due to time constraints, the size of the
investments, or the need for professional advice. The objective may be to have effective
management of portfolio aimed at capital creation with capital protection at the backdrop.

Process of Wealth Creation

Asset Vista sees your portfolio as a reflection of your profile aimed to fulfill the
identified objectives. Asset Vista would include a detailed risk assessment and
recommendation of an ideal asset allocation for you. Post asset allocation, a portfolio
would be prepared and dynamically managed on an ongoing basis. Asset Vista would
ensure that your portfolio is logical, strategic, and in tune with the changing environment
and always on track to achieve the defined objectives.

How we can help you

We will seek to manage and monitor your portfolio as per your objectives and your risk
profile. We would manage your portfolio the Asset Allocation way which is the most
effective & ideal way to manage investments. You would also have access to consolidated
portfolio reports that enable you to see all your investments into multiple avenues at a
single place.


7.SERVICES PROVIDED TO CLIENT

As NJ Wealth Advisor’s Global Private Client, you get comprehensive set of
services that ensure you stay informed, insightful, in command, of your investments at all
times.

 Comprehensive Financial Planning
We all have many responsibilities and goals in our lives. We have dreams and
aspirations for a better future. But quite often we are not sure as to how we will fulfill
these goals and aspirations. Life changes over time. We may never be sure what today


holds for us tomorrow. What if something goes wrong? How do we make sure that we get
what we wish?

A comprehensive Financial Plan is what you need. At NJ Wealth Advisors we offer
you with Comprehensive Financial Planning solutions which would involve …

 A detailed study of your goals
 Preparation of a comprehensive Financial Plan
 Monitoring of the Financial Plan on an on-going basis

At NJ Wealth Advisors we offer you with comprehensive Financial Planning
Services under the product – Life Vista.

 Quality Portfolio Advisory
Making money is easy. Managing money is difficult. And managing money in
today’s complex financial markets with multiple products on an ongoing basis becomes
even more difficult.

As investors we often may feel the lack of time and energy to undertake monitoring and
managing of our investments in multiple avenues. This requires both dedicated efforts and
skills in portfolio management.

At NJ Wealth Advisors we realise the need for quality, unbiased portfolio advisory
services. At NJ we would aim to manage your portfolio with a superior, time tested and
much effective way of Asset Allocation keeping in mind your risk profile.

At NJ Wealth Advisors we offer you with quality Portfolio Advisory Services under
the product – Asset Vista.

 Consolidated Reporting

Quality online Wealth Account:

As a premium client you would have access to one of the best online investment
accounts that offer comprehensive reports, many of which are unique in nature and give
valuable insights on our investments


Our online Wealth Account covers almost all the investment avenues that you may
have:

• Mutual Funds – All AMCs, All Schemes
• Direct Equity
• Life Insurance
• Physical Assets – Gold and Property
• Private Equity – Business
• Debt Products
o Bank Deposits and Company Deposits
o RBI / Infrastructure Bonds
o Postal Savings – KVP, MIS, NSC
o Debentures
o Small Savings – PPF, NSS

You would have access to Consolidated Net Asset Reports which would give you
a single view of all your investments into different avenues as given above.

Further, within each of the Asset class we have many more reports and utilities. Some of
the reports covered are …

Consolidated:
Consolidated Asset Allocation, Consolidated Net Asset, Interest Income, Profit & Loss

Mutual Funds:
Valuation, Transaction, Profit & Loss, Performance, Portfolio reports like - AMC /
Sector / Equity / Credit / Debt Exposure, Weighted Average Maturity, Dividend history,
etc

Direct Equity:
Demat accounts, Transaction, Valuation, Profit & Loss

Life Insurance:
Policy Report, Premium Reminder, Cash Flow

Debt:
Transaction, Interest Income, Maturity reports for different Asse


8. 360° – ADVISORY PLATFORM

NJ believes in “360° – Advisory Platform” philosophy …

With this philosophy, we try to offer all possible products, services and support which an
Advisor would need in his business.

The support functions are generally in the following areas …

• Business Planning and Strategy
• Training and Development – Self and of employees
• Products and Service Offerings
• Business Branding
• Marketing
• Sales and Development
• Technology
• Advisors Resources - Tools, Calculators, etc..
• Research
• Communications


With this comprehensive supporting platform, the NJ Fundz Partners stays ahead of the
curve in each respect compared to other Advisors/competitors in the market.

Needless to say, the complete NJ Fundz offering is hard to resis

(C) RESEARCH METHODOLOGY
1. RESEARCH PROBLEM:

To know investor’s behavior regarding mutual fund as an investment avenue.

2. RESEARCH OBJECTIVES (PRIMARY) :

To know investor’s behavior regarding mutual fund as an investment avenue.

RESEARCH OBJECTIVES (SECONDARY)
· To identify the objectives of the investors for investing in a mutual fund.
· To identify the investment patterns of investors.
· To find out which scheme is better according to investors.
· To study investors’ perceptions about level of satisfaction while investing in mutual
funds.

3. RESEARCH PLAN :

· DATA SOURCE

We have used primary data source to collect the data regarding investors’ behavior for
mutual fund as an investment avenue. The survey was conducted across jammu.

· RESEARCH APPROACH

Survey approach was under taken to know the behavior of investor regarding mutual
fund as an investment avenue.

· RESEARCH INSTRUMENT


Questionnaire was the instrument of collecting data

SAMPLING PLAN

Sample unit: All the investors who are occasionally or regularly investing in financial
assets and non-financial assets

Sample size:

Survey population comprises of the total reputed businessman, Professionals, and
individual investor was approx 70.

Sampling method:

In this study as suggested by the company a sample of reputed Businessman,
Professionals, and individual investor’s was selected and it was selected through non-
probability, convenience sampling method. Because all the Businessman, Professionals,
and individual investor’s could not be interviewed as per our requirement but according to
their availability and accessibility we meet them.

Contact method

The total sample size for survey was 70 investors by personal interview


4. SURVEY ANALYSIS AND INTERPRETATION :
Gender

There are 15 females and 55 males as respondents

male 55
female 15

Gender of respondents(% )

21%

males

females

79%


Q1 what is your age?

AGE
PARTICULARS NO.
20-30 20
30-40 25
40-50 13
50-60 10
60-ABOVE 2
TOTAL 70

From the above table we can say that awareness for investment in youngster has
been increased & that’s why out of 70, 20 are youngster who do investment and they
come in the age group of 20-30, then comes age group of 30-40 from which
25people do investment and other age group are 40-50 where they do investment of
13, 10 belongs to age group of 50-60 they do the investment, and 2 belongs to the
age group of60-above they do their investment. We can say that youngsters are more
careful for their investment.

Q2 what is your profession?

PROFESSION
PARTICULARS NO.
BUSINESS 4
JOB IN PRIVATE SECTOR 14
JOB IN PUBLIC SECTOR 35
OTHERS 17
TOTAL 100


Now 70 people doing investment out of which 35 people are from public sector, 14 are
from private sector, 4 are having their business and 17 are others which include retired
people, housewives and student. Reason for investment by all people was to secure the
future and reason given by people doing the job in private was their higher salary and
unsecured job.


Q3 Do you invest in mutual fund ?

PARTICULARS
YES 21
NO 49
TOTAL 70

From 70 people 21 of them are doing investment in mutual fund and 49 of them are not
investing in mutual fund but they do investment in other sectors for which information is
given in the next question.

Q4 If you are not investing in mutual fund then where do you invest (in proportion)?

INVESTMENT PROPORTION
EXCEPT MF?
PARTICULARS NO
INSURANCE 40
EQUIYTY MARKET 10
GOVT. SCHEME 30
REAL ESTATE 5
COMMODITIES 15
TOTAL 100.00

People who were not investing in mutual fund they do invest in sectors like insurance,
equity market, government schemes (includes banks, bonds &other scheme ), real estate,
commodities even people those who do invest in mutual fund they also invest in different
sectors. Out of 100%, 10% people do invest in equity market, 40% invest in insurance,
30% in government scheme, 5% do invest in real estate and 15% do invest in
commodities. People do invest in equity market due to higher returns available in it.


Q5 Rank the company according to your preference from top (1) to bottom (11)?

RANK THE MF FROM TOP 1 TO BOTTOM 11?
PARTICULARS NO
RELIANCE 11
BIRLA 3
TATA 3
LOTUS 0
SBI 31
HDFC 0
ICICI 21
FRANKLIN TEMP. 0
SUNDARAM 0
UTI 1
BENCHMARK 0
TOTAL 70

People who were investing in mutual fund had given the rank to different mutual fund
companies on the basis of what they think about that particular company and had given
ranks to different companies. Here in this data 31 people had given SBI as 1 st rank and the
second highest is ICICI where 21 people has given it as 1st rank and the reasons behind
giving 1st rank were their return, good credit in market and tax saving benefit.

Q6 Do you compare the returns or other benefits of mf schemes before investing?

ANNUAL REPORT CHECKING
PARTICULARS
YES 28
NO 42
TOTAL 70

It is necessary to compare the returns and other benefits because people do invest in for
higher returns so they compare with other companies also. Here 28 people compare the


returns and other benefits of mutual fund scheme before as well as after investing to see
how their investment is spread over in different segments.

Q7 which factors do you consider while investing in mutual fund?

SAFETY
PARTICULARS NO
EXT. IMP. 48
IMPORTANT 22
NEUTRAL 0
UNIMPORTANT 0
EXT. UNIMP 0
TOTAL 70

Investors consider different factors before investment and for many reasons they invest in
different scheme of mutual fund. Here reason for investment is safety of their money and
safety of their future so 48 people consider it ext important, while 22 people says it’s
important for their investment.

Many people consider very important to invest in mutual fund to save tax or to take tax
benefit. Therefore 37 people consider it as ext important to invest in tax saving scheme
while 32 people consider it as important for investment,1 person is neutral about it, and
nobody consider it as unimportant and ext unimportant.


RETURN EARNINGS
PARTICULARS NO
EXT. IMP. 26
IMPORTANT 44
NEUTRAL 0
UNIMPORTANT 0
EXT. UNIMP 0
TOTAL 70

Generally people invest in mutual fund companies for higher returns with less risk as
compare equity market and could able to earn good returns.26 people agree that they do
invest in mutual fund for higher returns and consider it as ext important, 44 investors are
considering it as important .

LIQUIDITY
PARTICULARS NO
EXT. IMP. 6
IMPORTANT 34
NEUTRAL 25
UNIMPORTANT 5
EXT. UNIMP 0
TOTAL 70

Above graph reveals that some of the investors means 6 are giving liquidity more
emphasis because by the way of open ended scheme they can any time liquid their
position, 5 investors had given negative response about it while 34 of the investors are
giving them least importance and 25 are neutral to it


Q8 How do you monitor the following.

NAV
PARTICULARS NO
MONTHLY 20
QUARTELY 26
HALF YEARLY 12
YEARLY 7
NEVER 5
TOTAL 70

NAV is the net asset value of your investment in units that comes of every week by this
you can come to know how much of your investment has been increased so it becomes
necessary to monitor but period of monitoring depends on investor. Here 20 of investor do
monitor monthly, 26 of investors monitors quarterly, 12 monitor half yearly, 7 monitor
yearly,5 never monitor.

RISK FACTOR
PARTICULARS NO
MONTHLY 14
QUARTELY 26
HALF YEARLY 21
YEARLY 5
NEVER 4
TOTAL 70

Risk factor is necessary to be monitor at certain time period though there is not much risk
in investing in mutual fund as compare to equity investment but monitoring is necessary to
check the returns and see that the managed properly. Here 14 of investors monitor it
monthly, 26 of investors monitor it quarterly, 21 do half early yearly and 5 do monitor


yearly. Risk factor is monitored before investment also to check the scheme and to see its
performance.


PORTFOLIO OF SECURITIES
PARTICULARS NO
MONTHLY 9
QUARTELY 14
HALF YEARLY 25
YEARLY 15
NEVER 7
TOTAL 70

Portfolio for securities means where the co invest in different sectors as it is decided in
advance so after making decision the AMC invest accordingly and it is been monitored
proper time period as required, 9 of investor do monitor monthly, 14 of investor monitor
quarterly, 25 do half yearly, most probably 15 of investors monitor it yearly and 7 never
monitor. Investor check out portfolio to see where their money is being invested.

PROFILE OF FUND MANAGER
PARTICULARS NO
MONTHLY 1
QUARTELY 4
HALF YEARLY 15
YEARLY 28
NEVER 22
TOTAL 70

Fund manager is the person who manage the fund of investor who had invested their
money in their company it is necessary that the fund manager should be qualified enough
to manager the fund of the investor because if he fails to manage the fund the investors
money is not secure. So 1 investor monitor profile monthly, 4 do quarterly, 28 do yearly
and 22 never monitor the profile. Generally investors monitor’s the profile before
investing.


Q9 Do you check out the annual reports of your scheme to evaluate the performance
of your scheme?

ANNUAL REPORT CHECKING
PARTICULARS
YES 61
NO 9
TOTAL 70

In the annual report of the scheme all the information of that particular scheme are given
information about the performance of the scheme, position of the scheme in the market,
portfolio of the scheme that where the investment has been done under this scheme, profile
of the fund manager is also given by this the investors can come to know the position and
qualification of the fund manager. So most of the investors are monitoring the annual
report.61 investors do monitor the annual report of the scheme, 9 do not monitor the
annual report.


Q10 Objectives for investment in mutual fund schemes (rank them from 1most preferred to 4 least
preferred).

OBJECTIVES FOR INVESTMENT
PARTICULARS RANK 1 RANK 2 RANK 3 RANK 4 TOTAL
RETURN/DIVIDEND 15 34 21 0 70
APPRECIATION 13 26 30 1 70
TAX 42 10 17 1 70
LIQUIDITY 0 0 2 68 70
TOTAL 70 70 70 70

Here in this question the investors have ranked the factors on the basis of their objectives
that for what reason they had invested in that particular scheme. 15 of investors had given
return/dividend 1st rank because every investor want benefits for the risk they had taken by
investing in that scheme, 13 of investors had given appreciation 1st rank because they want
something more including their invested amount.42 of investor has given tax saving as 1st
rank because while investing in some particular scheme their amount invested is
appreciated as well as they get the tax benefit,0 has given 1st rank to liquidity ..


5. LIMITATION OF THE STUDY:
Every research has its own limitation and present research work is no exception to this
general rule the inherent limitation of the study are as under:

· Interview method, which was followed in the present research work, is relatively more
time consuming.
In addition to this it is very expensive method, especially when spread geographic
sample is taken.
· Questionnaire method can be used only when respondents are literate and co-operative.
· Sample size was 70 that are not enough to study the awareness of Independent
individuals.
· As sampling techniques is convenient sampling so it may result in personal bias. Even
respondent give bias answers. Time is main constraint of the research as we have been
given project as well as study simultaneously.


6.FINDINGS AND RECOMMENDATIONS :
From the above analysis, I found that even though certainly not the best or deepest of
markets in the world, it has ignited the growth rate in mutual fund industry to provide
reasonable options for an ordinary man to invest his savings.

With the help of –

• Give more importance to safety and return attributes because Independent Financial
Advisors are more concern about safety and of giving more benefit of the investments
to their clients.
• Independent Financial Advisors who are not suggesting their clients to invest in mutual
funds due to their lack of knowledge of mutual funds. So, NJ India Invest should ar-
range mutual fund awareness Program of their and other independent Financial Advi-
sors on regular basis.
• By providing better service NJ India Invest should try to attract the Independent Finan-
cial Advisors to join with them.
• NJ India Invest should arrange special mutual fund awareness program for gener-
al public. So they can directly work with NJ India Invest as direct client.
• Majority of the Government employees take into consideration tax benefits before mak-
ing any investment. So NJ India Invest should highlight tax benefits in mutual funds.
• NJ India Invest should launch its brand awareness campaign to be successful in Mutual
fund advisory service provider
o NJ India invest should also concentrate on youngster who are interested in savings so
make them aware about different schemes for investment and arrange seminars for col-
lege going students, by this company gets more customers connected for long period.
o Put hoardings outside the colleges making NJ INDIA known to them and try to attract
them.


Key Findings: -

 Around 50% of the investors invest to maximize their returns and they are ready to take
moderate risks in their investment portfolio.
 Most of the investors give importance to the fact that their investment should grow in
value over a
period of time.
 Growth scheme is the most preferred for investment
 Knowledge about mutual funds and their various schemes is moderate among in-
vestors.
 It is necessary to make Mutual Fund more popular in the eyes of investors as well as
distributors and also cater trust which has been lost due to US-64.
 Most of the investors give importance to return, tax saving etc.
 Objectives of the investor are to get something in return for their investment and the
risk they are taking.
 Here the objective of the investor between the age of 20-30 is to earn the higher return.
 While the age group above 30years concentrates on safety and tax saving and they even
take care of the liquidity.


BIBLIOGRAPHY

Books referred

• Ch 9 and Ch 10 from David J. Luck & Ronald S. Rubin, 2003, Marketing Research, Prentice Hall of
India Pvt. Ltd, New Delhi
• chap-3 from Mutual Fund in INDIA by Nalini Prava Tripathy, pg no37-84 publication house Excel
books.
• NJ India Invest monthly fact file.

Web Sites

www.amfi.com
www.indiainfoline.com
www.njindiainvest.com
www.mutualfundsearchonline.com


Project on mutual funds as an investment avenue

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